Calculating Cost of a Consolidation Loan

Consolidation Loan Example

To find out how much you will repay, you do not have to get hung up with rates of interest! A quick and simple way to find out the total cost of the loan is to take the monthly repayment amount and multiply it by the number of months the payment must be made. This will give you the total you will have to repay. Look at the following example:-

You owe £12,000 to three credit cards and a small personal loan. You take out a consolidation loan of £12,000 to pay these off

The terms of the loan are that you have to pay £285/mth for 5 years (60 months) – interest rates as at April 04. This payment includes payment protection cover.

£285 x 60 = £17,100.

Therefore you now owe £17,100 instead of the original credit card and loan balances of £12,000. By taking this loan you will have spent an extra £5,100 in 5 years time, on repayments!!!

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